Seaspan: High quality, high yield
With a growing fleet and rising earnings, this is a high-quality, high-yielding play on global trade.
Seaspan (SSW) is one of the world’s leading charter owners of container ships. Virtually all of the company’s vessels are leased at long-term fixed-rates.
Today, Seaspan has a fleet of 72 vessels, with seven more scheduled for delivery through 2014. All seven container ships already are committed to fixed-rate time charters between 10 and 12 years in duration from delivery.
Seaspan’s customer base consists of nine of the world’s largest liner companies, including China Shipping, COSCO Container Lines, Compania Sud Americana de Vapores, Hanjin Shipping, MSC Mediterranean Shipping and United Arab Shipping.
Seaspan will keep growing aggressively to feed the booming transoceanic trade between Asia, Europe and North America. The company plans to keep purchasing new container ships every year for the next several years.
Growth in earnings per share is about to accelerate for two primary reasons. Number one, 90% of its revenue comes from China.
Even during this period of global economic weakness, millions are joining the ranks of the middle class there each year.
Secondly, Seaspan secures long-term contracts with customers before it orders new ships. That has allowed it to weather the economic contraction of the past few years. Seaspan also does a thorough credit analysis on customers to minimize defaults.
Then there are the numbers. Quarterly revenue -- thanks to its growing fleet – rose 39% last quarter. Operating margins top 48%. And insiders own nearly a quarter of the outstanding shares.
Seaspan currently pays a 5% dividend. And this yield may double in the year ahead. Why? Because earnings could jump almost 70 percent to $1.70 a share -- thanks to new vessels and rising commercial activity in Asia.
In sum, this is a high quality, high-yielding play on China’s import and export markets. Expect good news when Seaspan makes its next quarterly earnings announcement on March 12.
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These companies won't soar like other plays in the sector, but they make for great income sources.
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